Changes to Reverse Mortgage Laws - Are They Overdue?
A series of new laws were proposed in New York on Monday 9th January that will add financial protections for the state’s senior citizens.
A focus of this new legislation will centre around reverse mortgages. Such instruments enable borrowers to use their own home as a security for a loan, enabling borrowers the option to not have to repay the loan if they remain in their residence. Such mortgages are traditionally exposed to a greater rate of interest than traditional home loans, of which is compounded over time. Borrowers in their sixties or older are typically only eligible for reverse mortgages.
Recent statistics have confirmed the alarming rising rate of foreclosure by senior citizens of New York, of which has been attributed to the complexity of reverse mortgages. As a result, the New York Governor Andrew M. Cuomo has decided to take action and bring mortgage companies to account, stating “Misled and misinformed by advertisements, seniors often choose reverse mortgages for an additional income without fully understanding that payments are still required for all taxes, insurance, and home maintenance,”. “As a result of these deceptive practices, many senior citizens face foreclosure because of a missed tax or insurance payment.”
Current laws in New York prevent those sourcing a reverse mortgage the same level of protection than those who engage in traditional home loans, most notably the right to a settlement hearing when facing foreclosure. The proposed legislation will address closing this gap, as well as other shortcomings. These include, closing consumer protection loopholes, launching a review of regulations, all in the aim of protecting New York home owners by reducing foreclosures.
Cuomo’s as part of his announcement stated “Currently, banks are insufficiently using their power to place holds on, or prevent suspicious transactions involving elder financial abuse,”. “The Governor proposes new legislation further empowering banks to place holds on potentially fraudulent transactions in order to protect their consumers, and be immunized for doing so in good faith.” Unfortunately, exploitation of the senior members of our community is being carried out by many financial institutions with their reverse mortgage products, of which denies them the basics rights to protest the fairness of such instruments.
It’s great to see the New York governor take steps to close this loophole, of which will provide a better opportunity to seniors when seeking financial support in the latter stages of their life.
“Exploitation of seniors is a particularly heartless and heinous crime and this administration is committed to doing everything in its power to stop this abuse and ensure these New Yorkers receive the protections they deserve,” Cuomo said. “These proposals will help seniors keep their finances and assets from being vulnerable to thieves and unscrupulous practices, and stop those who seek to exploit them right in their tracks.”
Many elderly advocate groups have welcomed the news that will prevent unscrupulous lenders from preying in the elderly. However, a number of advocate groups have questioned why it has taken so long for such legislation to be imposed on reverse mortgage products.